Budget Advice/Newbie

[macher]

Hi I'm new to the forum. I'm trying to start a budget. We get paid weekly. Our fixed expenses are due monthly and we we have weekly expenses such as grocery, gas for 2 cars etc. We also want to budget for car and house maintenance, vacation, holiday gifts etc.

What's the best means to start. Should it be based on 48 weeks or 52 weeks? For instance our income x 4 or our income x 52/12?

That's my first question.

Regards!

[disneysteve]

What's the best means to start. Should it be based on 48 weeks or 52 weeks? For instance our income x 4 or our income x 52/12?

Your budget should be based on your income. If you get paid the same amount every week, then there are 52 weeks/year. If you only base it on 48 weeks, you'd have 4 weeks worth of income that weren't accounted for.

[Esozh]

Given that you are wanting to do a one year budget, break it down into 12 monthly budgets. Like DisneySteve said, you want to account for all income. If you get paid bi-weekly, figure out the months with an extra paycheck in them and account for that on those monthly budgets.

[phantom]

I think you could budget either way and make it work. As long as your budget works, there's no right or wrong way to do it. The trick is finding what way works best for you.

From the way you describe your situation, I would start out by setting aside enough money for groceries and gas out of each paycheck. Then I would take what is left, multiply it by 4, and take your fixed monthly expenses out of that. Then I would put any money left over after your fixed monthly expenses and the money from the months with 5 paychecks towards your longer term savings goals, like the vacation, the car, home maintenance, and gifts.

You might also find it useful to begin by putting everything on a monthly scale (multiply your paychecks and weekly expenses by 52 and divide by 12) just for planning purposes. That way you can say, "Oh we're talking about spending X% on groceries, y% on gas, z% on utilities, etc." I think it's useful to look at things in that way to get a sense of exactly where your money is going. Then it's up to you to decide on the mechanics of how you stick to that plan. If you plan on using any software to help you budget, you might also let the way that works influence your budgeting style.

[disneysteve]

I think you could budget either way and make it work. As long as your budget works, there's no right or wrong way to do it. The trick is finding what way works best for you.

True, but even if you choose to base your budget on 48 weeks, you still need to budget what to do with the remaining 4 weeks worth of income. It has to go somewhere whether it is savings, debt repayment, or additional spending. So ultimately all 52 weeks worth of income need to be in the budget one way or another.

[phantom]

True, but even if you choose to base your budget on 48 weeks, you still need to budget what to do with the remaining 4 weeks worth of income. It has to go somewhere whether it is savings, debt repayment, or additional spending. So ultimately all 52 weeks worth of income need to be in the budget one way or another.

Agreed. It's definitely important to plan what's going to happen to that extra 4 weeks of income. Otherwise, there's a risk of spending that money carelessly because it can feel like free money. That's why I suggested putting it towards the longer term goals in my longer example. But, perhaps I should have been a bit more explicit. You can either figure everything out based on a monthly plan or a 48 week + 4 week plan. But, a 48 week plan without a plan for the extra 4 weeks isn't a great idea.

[disneysteve]

Agreed. It's definitely important to plan what's going to happen to that extra 4 weeks of income. Otherwise, there's a risk of spending that money carelessly because it can feel like free money.

Yep. I love when people get all excited about the 2 months each year with 3 paychecks. They see that as "extra" money that they can go blow at the mall. That's just entirely missing the point of having a budget IMO.

[macher]

Agreed. It's definitely important to plan what's going to happen to that extra 4 weeks of income. Otherwise, there's a risk of spending that money carelessly because it can feel like free money. That's why I suggested putting it towards the longer term goals in my longer example. But, perhaps I should have been a bit more explicit. You can either figure everything out based on a monthly plan or a 48 week + 4 week plan. But, a 48 week plan without a plan for the extra 4 weeks isn't a great idea.

Yea after thinking about it the 4 weeks of income is significant and want to account for it.

I made a spread sheet. List income, fixed and variable expenses. How do you account for what I call weekly expenses such as grocery and gas for 2 cars as an example? Since I have those weekly expenses listed as month expenses I would X the expense by 12 and divide by 52 to get what we need

Example gas for 2 cars I have budgeted @ $434 month. I like to fill the cars every week. So that means out of our budget fill the 2 cars. If there is money left over then either keep it cause maybe gas in a any given week would be more than the budgeted amount.

[phantom]

I made a spread sheet. List income, fixed and variable expenses. How do you account for what I call weekly expenses such as grocery and gas for 2 cars as an example? Since I have those weekly expenses listed as month expenses I would X the expense by 12 and divide by 52 to get what we need

Example gas for 2 cars I have budgeted @ $434 month. I like to fill the cars every week. So that means out of our budget fill the 2 cars. If there is money left over then either keep it cause maybe gas in a any given week would be more than the budgeted amount.

To keep the numbers simple, let's start with the assumption that you spend $100/week to put gas in your two cars. That means that some months you will spend $400 on gas and some months you will spend $500 in gas. There are a couple of ways you could handle this:

1. Set a gas budget of $500/month. Some months you will have $100 unspent and some you will have none. But, you will always have enough unless you have to do a lot of unusual traveling. Then have a plan for where the left over money goes. Maybe it goes to savings or something like that.

2. Figure that if you spend $100 on gas a week, you will spend $5,200 on gas in a year. That's $434 per month. So, you can set your budget at $434 and let it rollover. So, if the first month you spend $400 and have $34 left over, give yourself $468 the next month. If you have $68 left over that month, you can start the next months with $502. Then when you hit your $500 month, you'll be prepared for it.

3. Just plan to have different budgets for each month. On months with 5 paychecks, your gas budget can be $500, and the rest of the time, it can be $400. If you always fill up your gas tank on payday, this might work really well. Even if the month you get paid 5 times and the month you get gas 5 times are different, if you let the budget rollover, this can still work.

No matter what method you go with, I would suggest setting your budget slightly higher than what you actually spend. That way, if gas prices go up or if you have to do a lot of travel, you're prepared. Then just keep an eye on things, and if you find you have too much money set aside to spend on gas, be prepared to use it for some other purpose.

[macher]

To keep the numbers simple, let's start with the assumption that you spend $100/week to put gas in your two cars. That means that some months you will spend $400 on gas and some months you will spend $500 in gas. There are a couple of ways you could handle this:

1. Set a gas budget of $500/month. Some months you will have $100 unspent and some you will have none. But, you will always have enough unless you have to do a lot of unusual traveling. Then have a plan for where the left over money goes. Maybe it goes to savings or something like that.

2. Figure that if you spend $100 on gas a week, you will spend $5,200 on gas in a year. That's $434 per month. So, you can set your budget at $434 and let it rollover. So, if the first month you spend $400 and have $34 left over, give yourself $468 the next month. If you have $68 left over that month, you can start the next months with $502. Then when you hit your $500 month, you'll be prepared for it.

3. Just plan to have different budgets for each month. On months with 5 paychecks, your gas budget can be $500, and the rest of the time, it can be $400. If you always fill up your gas tank on payday, this might work really well. Even if the month you get paid 5 times and the month you get gas 5 times are different, if you let the budget rollover, this can still work.

No matter what method you go with, I would suggest setting your budget slightly higher than what you actually spend. That way, if gas prices go up or if you have to do a lot of travel, you're prepared. Then just keep an eye on things, and if you find you have too much money set aside to spend on gas, be prepared to use it for some other purpose.

The gas budget is set higher than we actually spend and is set as if gas prices were .75 more per gallon.

I'm starting this budget in May which is a 5 week month.

Was looking at our bill due dates and I could use some help.

Due dates... For fixed exp

Mortgage 15th
Taxes 5th
Home and auto insurance 8th
Gas/Electric 30th
Car Pay 25th
Cable/Internet 25th
Water/Sewer 5th

[disneysteve]

Was looking at our bill due dates and I could use some help.

What's your starting point? Do you have any money in reserve or are you starting at zero? That makes a big difference. If you currently have no reserve, your goal should be to build up at least a one-month cushion of savings so that you aren't paying your May bills with your May income. Make sure that one line item on your budget is "Savings".

So let's say your monthly bills are $3,000. If you end April with $3,000 remaining in your account after everything has been paid for the month, you are all set for May. Then the income that comes in during May actually goes to pay your June bills. Once you have that set up, the due dates become irrelevant because you are no longer living paycheck to paycheck.

If you are starting from zero, it may take you a while to build up to that point but that's the goal.

[macher]

What's your starting point? Do you have any money in reserve or are you starting at zero? That makes a big difference. If you currently have no reserve, your goal should be to build up at least a one-month cushion of savings so that you aren't paying your May bills with your May income. Make sure that one line item on your budget is "Savings".

So let's say your monthly bills are $3,000. If you end April with $3,000 remaining in your account after everything has been paid for the month, you are all set for May. Then the income that comes in during May actually goes to pay your June bills. Once you have that set up, the due dates become irrelevant because you are no longer living paycheck to paycheck.

If you are starting from zero, it may take you a while to build up to that point but that's the goal.

We have a reserve of the total fixed expenses which is $3,000'ish the expenses/bills that I mentioned above.

What we don't have a reserve and starting from zero are creating a reserve for house and car maintenance, clothing, gifts etc, foreseeable medical co pays and prescription co pays, etc etc.

[disneysteve]

We have a reserve of the total fixed expenses which is $3,000'ish the expenses/bills that I mentioned above.

What we don't have a reserve and starting from zero are creating a reserve for house and car maintenance, clothing, gifts etc.

In that case, you're in pretty good shape so far. Keep the discretionary spending to a bare minimum - no new clothing, no gifts, no dining out, no travel, etc. - until you build up a reserve for that stuff.

Do you have any debt other than your mortgage? I think you listed a car payment. What's the balance on that and how much is the car worth? How many more payments remain?

[macher]

In that case, you're in pretty good shape so far. Keep the discretionary spending to a bare minimum - no new clothing, no gifts, no dining out, no travel, etc. - until you build up a reserve for that stuff.

Do you have any debt other than your mortgage? I think you listed a car payment. What's the balance on that and how much is the car worth? How many more payments remain?

Like I said we have enough to cover those fixed expenses. And we have left over after the reserve of $4500.

The expenses such as car and house maintenance, clothing etc that I mentioned above is $1317/month. To have a reserve and keep building on these type of expenses what is recommended? The total of these expenses is $15,804/year and we have $4500 towards that.

[macher]

I'll let it all hang out.

We have $7500 in bank saving account.

Total income : $5648/mo

Fixed Exp: $3117
Included in this is $150/mo Ortho bill for braces and $217/mo paying off 2 judgements.

Variable Exp: $1713/month
(Grocery, gas, bridge toll, cigarettes)

Variable Exp 2: $1100
(House and car maint, clothing, gifts/holiday, medical, sports/kids, haircuts(4)

We have a car payment of $300 and a no interest loan for braces for one of our kids at $150/month in which we owe $2500.

From looking at this budget it's the $150 Ortho bill/month and the $217/mo for judgements that is putting a hurting on us.